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Monday, July 25, 2016, 22:04

HK still a magnet for mainland property investors

By Zhou Mo
HK still a magnet for mainland property investors
A crane hoists rebars at a construction site in New York. In the first five months of 2016, the US, by bagging US$10.6 billion, remained the most popular destination for outbound property investments from the Chinese mainland. (Michael Nagle / Bloomberg)

Hong Kong is still the second most popular place for Chinese mainland investors to put their money into despite the economic slowdown and the global uncertainties.

According to a report by international property services provider DTZ/Cushman & Wakefield, outbound property investments by mainland investors grew by 56 percent year-on-year in the first five months of 2016, compared with the same period last year.

They poured US$17 billion into overseas real estate from January to May – up from US$10.87 billion a year ago – accounting for 65.6 percent of total investments in 2015.

Mainland investments in Hong Kong reached US$3.11 billion in the first five months, making the SAR the second most popular destination after the US, which attracted US$10.6 billion.

Most of the property investments in the SAR went to offices, which took up US$2.91 billion, while development sites came second with US$167 million, according to the report.

“Thanks to a stronger US dollar, a recovering US economy and relatively low financing costs, the US has remained the most attractive destination for mainland investors and its lure is expected to grow further as the US economy improves,” said Justina Fan, head of outbound investment of Greater China and managing director of Asia Pacific at DTZ/Cushman & Wakefield.

“However, the growing interest in US properties will not affect investors’ enthusiasm for Hong Kong because investment demand for the US and Hong Kong is different.”

While mainland investors snap up US properties mainly for investment purposes, Hong Kong properties are bought largely for self-use, Fan told China Daily in an interview.

Last year, Hong Kong also ranked second, behind the US, in attracting outbound mainland investment, drawing US$4.11 billion.

Fan said while the US is expected to remain the most favored country for mainland investors, Australia and the UK may also become hotspots in future.

“The exchange rate between the yuan and the Australian dollar is relatively low and its ROA (return on assets) is very attractive. Meanwhile, although Brexit may bring down transactions by 6 to 9 percent in the second half of 2016 and soften the prices of certain asset classes in the UK, investors may find opportunities in the mid and long term.”

The mainland’s economic growth continued to slow down in the first half of this year, with gross domestic product growing 6.7 percent year-on-year in the first and second quarters – the slowest quarterly growth since 2010.

“However, rather than a setback for outbound investment, the economic slowdown plays a role of pushing up investments,” said Fan.

When the mainland economy slows down, domestic investment opportunities become fewer, prompting investors to look overseas, she said. Mainland investors will also find the ROA of outbound investments higher against the backdrop.

“The fundamentals of the mainland economy are healthy at present. Therefore, the slowdown will not affect but promote outbound investment.”

According to the report, offices took up the lion’s share of cross-border investments in terms of asset classes in the first five months – at 50 percent.

Investment in hotels saw a big increase, accounting for 42 percent with US$7.1 billion, which is 28 percent more than that recorded for the whole of last year – a result of the rapid growth of outbound mainland tourists.

“Mainland investors’ outbound investments will keep growing for the rest of this year, but it remains to be seen whether the fast pace of growth can be sustained,” Fan said.
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